Berkshire to Pay $4.1 Million to Settle Allegations of Violating U.S. Sanctions on Iran -- Update
October 20 2020 - 7:11PM
Dow Jones News
By Mengqi Sun
Berkshire Hathaway Inc. has agreed to pay roughly $4.1 million
to settle allegations that a Turkish subsidiary violated U.S.
sanctions on Iran.
The U.S. Treasury Department on Tuesday alleged that Berkshire's
indirect subsidiary -- Iscar Kesici Takim Ticareti ve Imalati
Limited Sirket -- sold cutting tools and related inserts to two
third-party Turkish distributors between 2012 and 2016, knowing
that the goods would be shipped to a distributor in Iran for resale
to end-users there.
Several of those recipients were identified later as Iranian
government entities, according to the civil settlement agreement
between Berkshire and the Treasury's Office of Foreign Assets
Control. Federal regulations prohibit any U.S. companies and their
foreign subsidiaries from dealing with the government of Iran and
its entities.
Iscar Turkey, direct subsidiary of Berkshire's IMC International
Metalworking Companies B.V., completed 144 orders of goods worth
about $383,000 that were shipped and resold to Iran. OFAC, which
administers U.S. trade and economic sanctions, said the company's
conduct "represents particularly serious apparent violations of the
law calling for a strong enforcement action."
A spokesperson for Berkshire didn't immediately respond to a
request for comment.
The settlement amount is small for a company the size of
Berkshire, which has a stock market value of about $500 billion.
But compliance efforts of such sophisticated multinational
companies also can break down. Omaha, Neb.-based Berkshire
disclosed the alleged misconduct to OFAC after receiving an
anonymous tip about the alleged violations in January 2016,
according to the agreement.
The alleged activities began with Iscar Turkey starting a
business relationship with an Iranian distributor in 2012,
according to the agreement. Iscar Turkey's general manager at the
time believed that U.S. and European Union sanctions against Iran
would inevitably be lifted and sought to be positioned to sell in
that market, according to the settlement.
Certain employees at Iscar Turkey then allegedly took steps to
conceal its transactions involving Iran from being detected by
Berkshire, despite repeated communications and policies sent by
Berkshire and its subsidiaries regarding U.S. sanctions against
Iran, according to the agreement.
These employees allegedly used private email addresses to bypass
controls and visibility of the company email system, false names in
internal records and provided false assurances in response to
compliance inquiries. Iscar Turkey also received payments in euros
to obfuscate its transactions with Iran, according to the
settlement.
The alleged activities were barely detected internally, OFAC
said. Employees of other Berkshire subsidiaries, from which Iscar
Turkey also purchased goods to fulfill orders destined for Iran,
received information in emails that could have revealed that these
orders may have been prohibited by corporate policies and
procedures, according to the agreement.
Only one Berkshire subsidiary informed Iscar Turkey that such
transactions were prohibited, and others didn't, according to the
agreement.
OFAC credited Berkshire for its cooperation with the
investigation and the steps it took to remediate the compliance
lapse, including replacing personnel involved and enhancing
compliance procedures for its foreign subsidiaries, according to
the agreement.
Write to Mengqi Sun at mengqi.sun@wsj.com
(END) Dow Jones Newswires
October 20, 2020 18:56 ET (22:56 GMT)
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